The Final Nail in the Coffin
I think that Colin Powell has delivered the final nail into John McCains coffin. This election is done. Having a man like Colin Powell come out and endorse you in such a positive manner should and will carry considerable weight. With just three weeks left before election day Mr. Powell has come out and taken away any doubt that Barack Obama can handle the office of the President. This, in my opinion, is further bad news for the markets. One of my favorite expressions is "Perception is reality" as such big business traditionally looks at Democrats as being bad for them. Barack Obama has come out and used the term "Income redistribution" and has made it clear that he intends to raise taxes on more wealthy Americans. Couple this with the high probability that the Democrats will also capture the Senate (they already control the house) and you are looking at a clean sweep for control of all three branches of the government. I believe that the Democrats will not only win this election....but win convincingly. As I said before this will be viewed negatively by the market now, BUT another favorite expression of mine is, "Sell the Rumour....Buy the Fact" ans I expect the markets to rebound (at least temporally) after the election.
I remember this happening after Lula was elected President of Brazil a few years back. The markets were in terrible turmoil. The currency was weakening, stocks were under pressure and the bond market had no bid at all. After he came into office, people realized that he wasn't as bad as expected and the markets turned around for an extended period of time. I hope that happens here, for now I will continue to trade very short term until a more stable market develops.
Good Luck and Good Currency Trading.
Labels: Markets
posted by Banker at
Monday, October 20, 2008
3 Comments:
really nice blog indeed
GREAT comment about Lula. I kept track of him when he was a leftist labor union leader back in the early 90s -- with an eighth grade education no less. The pragmatic centrist that took office was very different from the fire-eating socialist I studied in college. But he has presided over a pretty extraordinary period for Brazil -- and has managed to maintain a good degree of popularity during a very tough period for him politically and for Brazil. He even came out agains the expansion of labor and trade unions at some point, saying they were simply too prevalent. Very pragmatic fellow! And that isn't easy these days.
I really don't think one can compare Obama to Lula, however. Contrast, perhaps. Obama has never really led anything like a labor or trade union. He has never directed a large organization. It is clear he has an intellectual capacity that exceeds Lula's, but lacks the canny, scrappy intelligence of Lula. Still, the depth of Obama's understanding and his commitment to his vision is striking. And it isn't a preemptory, aggressive vision this time. It is quite benign, in fact, without being spineless. And he isn't a foe to business. Quite the contrary. I don't think voters are doing their homework -- even the smart types. They would rather accept that he's a socialist on face value from Hannity or Limbaugh or Kudlow or some other media hack. We can't boil down his proposals to a sound bite, like "redistribute the wealth". In fact, this sound bite is the extent of the understand that most conservatives have. Pretty shameful, when one considers how arrogantly they parade the "socialism" thing. I'm not quite sure they understand what socialism is.
Truth be told, I think Obama won back during the primaries. Clinton was hated by a large proportion of people who would never change their minds, much less actually read anything about her proposals. The hatred was visceral. And McCain suffers from character flaws that prevent him from ever taking office -- unless he is running against someone who is (a) more volatile, impulsive and maladjusted than he is or (b) not in possession of a pulse.
Also, Powell is not the slam dunk people think he is -- there is a sizable proportion of the left that is furious at him for his part in leading the US into the Iraq war -- as misunderstood as that part is. And I'm not sure his endorsement will translate into votes from the moderate conservative bloc, either.
I have great respect for Powell. I completely understand the reasons for his endorsement. And many of my colleagues understand this as well. But most of the thinking people in my community were already behind Obama for the same reasons. I suspect the endorsement is more of an affirmation than tool of persuasion. I think the polls reflect this -- there was little to no change in the numbers today, or at any rate nothing statistically significant. (At least, this was the case for the polls that I've seen.) The employees at teh Department of Defense and the State Department had immense respect for him -- it was almost universal. He is regarded as a true statesman and would be perfect as an ambassador at large -- it is in such a post that he could offer some cache to an Obama presidency and perhaps remove some of the inertia in US foreign policy -- not at the heady ivory-tower level, but in the diplomatic trenches where point and counterpoint are hashed out until the wee hours. I don't expect him to return to the DoS or the DoD in a formal executive position. I think he's had enough BS for one lifetime. But then I've called it wrong before!
But back to taxes...you know, the way I look at it, Americans think they can eat their cake and have it, too. We are incredibly selfish. We do not understand the public good, the commons, and how important it is to democracy and healthy markets. We think we shouldn't have to pay taxes -- so I ask, how will we pay for entitlements that your parents, you and your children will draw from? How will we build out the infrastructure that until forty years ago was the best in the world? What about public schools, which have trained our workforce for decades? We all need to pay our goddam taxes. Neither candidate is preparing the American people for this eventuality. It's dishonest.
On the other hand, I think the prevailing opinion that he will be a big spender -- a tax and spend liberal, as the dinosaurs like to say -- is wrong. I think the big spenders are on their way out, to be frank about it. I think the conservative base has been dishonest about the real costs of the war in Iraq -- they refuse to talk about it when they talk about spending, taxes and the like. At one point, there was absolutely no mention of it in the OMB's budget report. Shameless.
I say all this knowing that markets are not rational, that I have no reason to expect the markets to behave in a reasoned way when it comes to politics. I don't expect politicians to behave in a reasoned way when it comes to markets, either. And I say this knowing that whatever the outcome of the election (and we both know what it will be), the markets will keep rolling along.
So, I suppose my advice to the markets would be to get over it and get to work. And pay the goddam taxes! (But we really, really need to clean up the !#$!% tax code man! It's a mess and everyone in Congress should be fired for not doing something about it.)
LT thanks for the great comment. You obviously put alot of time and a heart felt opinion into it.
I was not trying to compare Obama to Lula except in the way the markets seem to be reacting to both candidates before they were elected (see I expect Obama to be elected) and how the market will potentially react afterwards.
You raise alot of good points. Americans hate paying taxes (well then again who does) and I agree that an overhaul of the tax code is important (but will never happen). I also think that wealthy Americans do not pay enough...the question is what level makes you a wealth American?
The perception that Obama will be bad from buisness, from my perspective is that his thresehold for raising taxes on small buisnesses is to low (250,000 if I have my information correct).
I totally agree that the "Big spenders" are on their way out! And that the war has cost much more then they are admitting to.
As for Colin Powell, I happen to be a big fan. He has actually changed my opinion on this election. I consider myself a centralist, with a slight lean to the right. But Colin Powell brought up some very compelling reasons to vote for Obama. Enough so to have me questioning my vote. I thought that if I could be so swayed....possibly other Americans were in the same boat. As you say the polls are not showing that now (BTW what is your view on the Bradley effect?).
Again thanks for the comment it really made me think.
Banker
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